FRC doesn’t need another bean counter

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UNDERSTANDING the Binomial Model is the catchy title of an internal training document produced by accountants KPMG. To the uninitiated in the intricacies of valuing share options, this document, complete with graphics, would probably not enhance their understanding of the binomial model very much.

It seems inevitable that a model would have to be pretty complicated if it sets out with the objective of this one, which is to represent “all possible paths that the share price could take during the life of the option”. The document proclaims that typically, up to 250 to 500 steps are created in a